The global agency has also kept the rating outlook for Union Bank at positive and changed the same for Central Bank to stable from negative. While the ratings on Union Bank has been retained at Baa3/P-3, Central Bank is affirmed at Ba1/NP, it said in a statement issued from Singapore.

However, it has lowered the baseline credit assessment of Union Bank to Ba3 from Ba2 and retained the same of Central Bank at B3. On the ratings rationale for Union Bank, it said the action reflects the continued deterioration in its asset quality. It can be noted that bank's impaired loans ratio deteriorated to 11.6 percent in the September quarter from 9 per cent in the same period of 2014.

Though the pace of new impaired loan formation has moderated, its asset quality continues to face downside risks, particularly from exposure to stressed corporate, it noted.

On the positive side, Moody's said,"It expects the bank will benefit from recent the government policy initiatives to reduce stress in the banking sector. In particular, the UDAY scheme will alleviate some of the pressure on its exposure to power distribution companies."